Brexit and some infrastructural challenges

Marie Hunt, the head of research at property consultants CBRE spoke about their view on Brexit at this years British Irish Chamber of Commerce conference. It is an interesting perspective

Yes, there will be job announcements, but maybe not at the scale some people anticipate. We are competing with a number of other European cities and the competition is hotting up. We do have the office capacity, but we face a number of infrastructural challenges, which are impacting our competitiveness (and other cities are happy to point them out). Brexit will hopefully also impact positively on other cities in Ireland from a jobs perspective. Here are her thoughts in more detail. It is well worth a read.

What EU capitals are likely to benefit most from Brexit?

Earlier this year, I participated in a debate at the MIPIM property conference in Cannes which was entitled ‘What EU capitals are likely to benefit most from Brexit?” alongside representatives from a range of different European cities. Needless to say, it was a very interesting debate and many of those attending were surprised to hear that while there is some potential upside for Dublin, Ireland actually has more to lose than any other country from Brexit.

Uncertainty

Brexit has created huge uncertainty and there are many unknowns but the bottom line is that it will be negative for the Irish economy and in particular the agri-food sector. On the basis that the real estate sector is really only a subset of the economy, for the most part, Brexit won’t be positive for the property market either. It creates huge uncertainties for different sectors of the market including the retail sector, the industrial & logistics sector and the hotels sector and unfortunately we don’t yet know the answers to the various questions occupiers and investors in these sectors are posing. However, one of the only sectors that will potentially benefit from Brexit is the office sector of the commercial property market.

Job drip

While we believe that we are potentially going to see several jobs announcements of hundreds of jobs each as opposed to wholesale relocation of thousands of UK jobs, there is some potential upside for cities such as Dublin in particular. This is because many UK companies, particularly financial institutions, insurance companies and legal firms are considering relocating some of their operations to an EU jurisdiction to circumvent losing access to the single market once Brexit happens. Other companies such as technology companies who typically employ workers from lots of different jurisdictions may be less inclined to increase headcount in the UK if visas and work permits will be required going forward. They could decide to increase headcounts in other EU destinations instead. This could potentially be positive for Dublin in particular being that it is already home to the EMEA headquarters of a range of technology companies such as Facebook, Google; LinkedIn, Paypal, Twitter etc…

Amsterdam, Frankfurt, Berlin, Luxembourg.

Over the last 12 months, property consultants, accountancy firms, HR companies and other consultants have been busy dealing with a surge in appetite for information on Dublin and other Irish cities as potential occupiers reviewed their options. Many of these companies are now narrowing down their searches to specific cities and in some cases to specific buildings. Appetite has certainly increased in the last 12 months. To date, several companies have identified Dublin as a possible location for their EU business and a number have confirmed their commitment to specific buildings in Dublin including JP Morgan and Barclays. There are also several live mandates which we expect will translate into further job announcements over the coming months. There are sensitivities involved in these announcements and in some cases the companies involved will not link the job announcement to Brexit specifically. Indeed, many of these companies were already in the process of relocating some jobs to other jurisdictions such as Ireland as part of near-shoring and cost-cutting exercises but Brexit has expedited their decision. The cities we are competing directly with include Frankfurt, Berlin, Amsterdam, Paris, Brussels and Luxembourg, many of which I have visited this year.

We can cater for the demand in office space

I have been surprised by the extent of spinning that is going on against Dublin (some of which is by Irish people!) and in that respect I must commend the Greater Dublin is Greater than Ever initiative undertaken by the British Irish Chamber of Commerce and the Lord Mayor’s office because it has given us ammunition to go out there, sell the story in a succinct way and fight the many misconceptions about Dublin and Ireland. In addition, there is great work going on behind the scenes by both Government and the IDA. I have been particularly frustrated at the myth that Dublin doesn’t have enough office stock to cater for any Brexit related demand that materialises, to the extent that we have published a document which is entitled “Dublin Will Have Enough Offices to Meet Brexit Demand”… In fact, there are currently 27 office schemes totalling almost 4 million square feet under construction in the capital which will add 10% to the total stock of office stock in the capital.In addition, there is currently 5.8 million sq. ft. in 48 individual schemes with a grant of planning that can be delivered in due course if demand materialises. We can turn on the tap and deliver sufficient office stock if the demand materialises and this gives potential occupiers good visibility on potential office supply. The mantra for this cycle is ‘If they come, we will build it’ as opposed to ‘Build it and they will come’ which was the mistake we made in the last cycle.

The issue is infrastructure

The bigger issue for the Irish Government is to address infrastructural deficiencies such as schools, traffic, and in particular the provision of much-needed housing albeit I think it is fair to say that this is being addressed and we are beginning to see a meaningful improvement in housing supply. Indeed, many of the office schemes currently under construction are mixed-use schemes and will provide residential accommodation as well as office stock.

Why Dublin

The main attributes that are in Dublin’s favour include the fact that:

It is a safe and secure city offering an excellent quality of life

Its proximity to the UK & geographic location which is important to businesses trading across different time zones

Its connectivity

The fact that it will be the only Eurozone member post-Brexit with English as its first language

Similar legal, accounting and taxation systems to the UK

The availability of a young, highly educated and talented workforce

The diversity of its workforce (11% foreign vs 7% in the UK) – 1 in 6 people in Ireland is non-national

Occupancy costs that are considerably lower than London or indeed Paris

12.5% corporate tax rate

Beyond Dublin

We don’t see an influx of Brexit-related jobs moving en masse to Dublin as was anticipated in the immediate aftermath of last year’s Brexit referendum result but rather see a welcome increase in demand from some well-respected UK companies looking to move an element of their operations to an EU destination and we think Dublin, in particular, will fare well in this respect. That is not to say other smaller Irish cities such as Cork, Limerick and Galway won’t benefit from some Brexit-related relocations activity in due course. With some US multinationals, who account for about one third of office take-up in Dublin each year likely to put some expansion plans on hold as a result of the new US administration, this additional demand from the UK is coming at an interesting time in the property cycle and will be interesting to monitor over the next few years.

Showcasing Ireland

"Rather than focussing on the job announcements that have gone to other locations and musing on why they chose another location over Dublin or another Irish city or indeed lamenting the gaps in Ireland's offer, we should be focussing now on the attributes that we can offer and showcasing Ireland as best we possibly can with the aim of winning our fair share of any relocation activity that might occur. While for the most part, Brexit is not good for the Irish economy, this is one potential upside that we can take advantage of".

Marie Hunt, Executive Director, Head of Research, CBRE Ireland

In Ireland, with offices in Dublin and Cork, CBRE is the country's largest commercial real estate services company, now employing over 165 employees and offering a full range of property services including property sales and acquisitions, leasing and management, investment, corporate services, debt advisory, project management, consultancy, business rates and compulsory purchase, valuations and research. Please visit our website at www.cbre.ie .

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About the author

Ron’s combines books, social media, narrative, story telling, dialogue learning and collective wisdom with innovation, intrapreneurship and strategy. Helping businesses to succeed and grow.
He is a father of two, entrepreneur-in-residence for Sustainable Nation. In 2017 he merged Bookbuzz with StrategyCrowd (consulting entrepreneurs) and is one of the founding partners. He is also the co-founder of www.smallbusinesscan.com.
Ron has worked all over Europe and the USA with a variety of clients, including the Irish government, EBRD, ILO, OECD, Arizona State University, DCU, UCD, ICM, RBS, Allianz, Deloitte, AIB, Bank of Ireland, Primark, Enterprise Ireland, Ulster Bank, HP and many more.
His books focus on entrepreneurship and strategy have been best sellers in both Ireland and the UK. He is currently writing a book on future proofing (“future proof you”).
He is a regular contributor on Newstalk radio, a regular public speaker on innovation, strategy, future trends and entrepreneurship and his articles and blogs are featured in the media in Ireland and the UK.
Ron is an Irish Institute Alumni, the entrepreneur in residence of Sustainable Nation, a founding partner in StrategyCrowd, is an advisor to a number of exciting start-ups, a fellow of the Institute of Commercial Management, member of the IOD and on the panel of experts in entrepreneurship for the OECD.